UPDATE: MLV & Co Initiates Coverage on Dynex Capital with Buy Rating on Mitigating Factors
In a report published Tuesday, MLV & Co analyst Richard Eckert initiated coverage on Dynex Capital (NYSE: DX) with a Buy rating and $9.00 price target.
In the report, MLV & Co noted, “We are initiating coverage of DX with a Buy rating and $9 price target. DX shares are now trading at historically wide discounts to book and high dividend yields relative to industry benchmarks. DX may have caught investors by surprise by reporting a 15% decline in book value at the end of Q2, after which the shares sold off sharply. They have recovered somewhat since then, but the company and its shares still appear to be in the penalty box. The drop in book value was attributable to basis widening, a byproduct of the volatility gripping the bond markets in Q2. That volatility has persisted, but we expect it to eventually subside. Also, we feel investors are ignoring mitigating factors, such as slowing prepayment speeds. We believe that as these considerations begin to inform investor expectations, the large discount between book value, which we have estimated at $9 twelve months out, and current market value will narrow. And, at the low-teens dividend yields we anticipate (based on current prices), investors would be paid to wait.”
Dynex Capital closed on Monday at $8.49.
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